We all know that the numbers for January were bad. Now we can see some detail according to the US TIA. Just looking at Europe inbound visitors declined from the 27 Member countries of the EC significantly. The biggest drop was from the UK in terms of total numbers. markets with over 20% drops were:

UK, Ireland and Sweden. Interestingly all these national airlines are suffering more than their fellow Europeans.

Here are some highlights:

• U.S. visitation from the 27 European Union countries declined 11 percent in January 2009. At the same time, arrivals from Western Europe, 568 thousand visitors, were down 12 percent and accounted for 37 percent of overseas arrivals. o In January 2009, arrivals from the United Kingdom were down 20 percent. Visitors from the United Kingdom accounted for 35 percent of all Western European arrivals. o In January 2009, German arrivals decreased 10 percent (the previous 20 months posted consecutive increases) and French arrivals declined three percent (the previous 27 months posted consecutive increases). At the same time, Italian arrivals were up six percent. o Also in January 2009, visitation from the Netherlands decreased 14 percent, visitors from Spain declined five percent (the previous 33 months posted consecutive increases), and >arrivals from Ireland dropped 21 percent. For the month, arrivals from Sweden were down 11 percent (the previous 27 months posted consecutive increases) and arrivals from Switzerland were down two percent (the previous 33 months posted consecutive increases).

Twitter seems to be everywhere. I groaned last night to see Twitter even on a TV commercial. Its everywhere on the US Cable News networks. It brought out people on the streets in Moldovia. ITS EVERYWHERE.

Granted it has its uses - and I am sure that there are a goodly number of people who are very happy with it and are madly Tweeting away to their friends. Heck yes - I even Tweet occasionally.

So how is it doing in terms of traffic say compared to MySpace, FaceBook and 2nd Life?

Facebook with no business model (who needs one!) has just passed 200 million users. It is maturing and newbies are coming from the older more affluent types rather than just college users. It has spread wildly throughout the world except for China where it is officially frowned on. Its fellow competitor MySpace seems to have lost momentum. And probably last year around May it lost its pole position to Facebook. Secondlife has been slowly declining as people moved on to shinier toys to play with. The Real World is way more interesting than the virtual one. Twitter on the other hand has shot out of nowhere and is now well into the top 100 sites. Remember that it has a number of non-web activities so the actual amount of traffic being generated makes it probably one of the largest perpetrators of ... digital junk. Yes friends it seems like the whole world has caught the Twitterrhea disease.

The German market seems to be holding up better than many others. While the UK languishes in a deep economic doom and gloom climate and Brits contemplate going back to Holiday Camps such s Butlins, the German market seems to be resilient and holding firm if down a little.

There are several reasons. So the Professor took a look at the market to see if he could understand why.

Germany is not as much of a property owning market as is say the UK and USA. With over 1/3rd of the population now living alone - one of the highest in the world - the concentration of these live alones seems to be concentrated as one might expect in the cities. However the characteristics are not similar across all sectors of the country. There is the prosperous older north and the swinging south up coming. Interestingly because Germany does not have the same concentration of population in any single geography there remains a strong tie to the region in which people were born. The migration to the cities is not concentrated as it is say in the UK towards the south east.

Because of these characteristics we believe the German market for travel will remain robust and stable for quite some time. Unless something dire happens in the coming months, the German economic engine - while perhaps not the huge driver of growth that it once was - will still however purr along nicely. This should mean good news for LH and the big 2 tour operators. In the short term Air Berlin should benefit with its focus on the German regions.

09 April 2009

The now stalled negotiations between British Airways, Iberia and American Airlines to form a true joint venture are all but dead in their current form after BA's leader Willie Walsh told a Spanish Newspaper that “These negotiations aren’t a distraction for our management team,” he said. “BA and Iberia know each other very well, so I don’t feel under any calendar pressure.”

Perhaps not so for him - but in March his opposite number at the former Spanish National Carrier indicated that a decision was both imminent and would indeed be made at the end of March. Well that came and went with no public announcement. So pretty much that puts paid to the possibility of a BA+IB merger in the short term.

So this leaves the proposed BA+AA+IB (BAAABI to you and me) JV in limbo. American might just start to get impatient with their European cousins.

In my opinion the IB+BA merger has lost its luster and wont regain it for some time. Willie has many more urgent issues on his plate. When he says this topic "isn't a distraction for our management team" that is somewhat of an understatement. BA has many pressing issues on its plate that far outweigh the merger. Not least of which of course is the current situation with its traffic numbers. March is likely to be awful at the very time when the US market is actually showing some signs of life. Whereas total US travel agency transaction numbers were off by a lesser amount in March that the disastrous numbers in Jan and Feb, International yields went into the toilet.

So does the transatlantic JV make sense in this environment? Specifically booking numbers for March show that international transaction numbers were off by 8% vs the total transactions off by 11%. However when the value of all US agency issued tickets is counted the proportion was reversed 27% vs 25%. I guess those Wall Street Types have either stopped traveling or are slumming in Coach - or more likely on domestic airlines. Anecdotally we are hearing that many recipients of US government bailouts are quietly instituting a buy American policy. The logic is that the US public would be really outraged if they thought that their tax dollars were being used to fly in business or first on a foreign airline when their own carriers are hurting so badly. Thus BA is clearly hurting badly and their numbers show it. BA's profile on the Transatlantic that represents such a large part of its business right now just stinks.

However with Continental getting its Star anti-Trust immunity nod this week - AA at least must be thinking that things are looking up. Not so fast quickdraw. AA+IB+BA's share of traffic at LHR is not dropping - actually it has climbed. With AA closing LGW and STN last year all their eggs in the Southeast of England are now concentrated at LHR. The dominant position that the triumvirate comprise at Fortress LHR is not likely to change any time soon either. Thus the dominant position they would exert on the Transatlantic market remains a threat to any competitor.

QED I think my supposition is that BAAABI is still dead.

Let's hope that they can come up with something magical to revive this.

BA is issuing another profits warning. This time it is blaming 3 things - increased losses as a result of the downturn in the US economy, the Snow in February (wrong type of snow???) and increased staff cuts costs.

BA is not done yet trying to undo a strong dependence on Corporate Premium Cabin traffic by cutting more heads. Hard on the heels of the massive head count reductions at Waterside last year, 450 Management heads went last year. Now here comes another 350 heads that will go.

As The Professor understands it 100% of BA's EMEA based staff have been offered voluntary redundancy. It will be interesting to see who takes advantage of this.

One thing is for sure - the lines for lunchtime feast have definitely become shorter.

08 April 2009

So the first quarter is over and now the counting can begin. There is some relatively good news. The significant downturn we have seen in January and February seems to be easing for March.

While total ticket sales - transactions are down still - the drop is not nearly as significant as we have seen earlier. Further with Easter occurring in March last year and much later this year - we have some hope for a lessening crisis.

However there are still some things we need to watch out for.

1. Average transaction value is still down2. Premium traffic is still down3. Certain markets are harder hit than others.

Once we get a view of the ATA numbers we can start to see if there is indeed a slowing of the downward curve. I am still sticking to my predictions of a 10-15% drop in traffic for the whole year.

07 April 2009

Most traffic numbers are now in for February. Almost across the board traffic is just off. In many markets it has been over 20%. Asia seems to have been especially hard hit. While the US and European markets are affected - it is hard to find any good news out there.

However I will hold up LATAM as a good example - at least for passenger traffic. While freight traffic is still in the dumps (off >20%) passenger traffic for the first 2 months are still slightly ahead. And this is with the extra day from last year.

How anyone can just stop producing "art" cold turkey remains a mystery to me. Why Gary Larson stopped producing the Far Side remains a complete mystery to me. He "retired" at only 45 and it has now been 13 years since a new Far Side cartoon was published.

In a bid to outdo its competition - ANA has managed to steel a march on both its local competition and probably many different players as well. ANA is braving the flack and commercial risks by agreeing to take most of the first 11 aircraft off the line. I clearly don't think this is hubris and it could turn out to be a very smart move. Given the amount of compensation that Boeing is going to have to pay everyone for the late deliveries - this could also actually increase the cost for Boeing.

Of course we don't know at the moment what the likely performance is of the initial aircraft whether they will be -8s or -3s. I suspect they will be -8s.

There are a few others mixed in. DL has pushed its first aircraft out and ceded a delivery spot to AI. Co I think gets ship #7. It also looks like most of these will be new builds rather than refurbs. Boeing will quietly use the first few aircraft as demonstrators or have an extensive "test" fleet program which will likely not see the initial aircraft going back into commercial operation - at least for quite some time.

it also means that the ramp up delivery schedule is going to be pretty light. Punters are betting on a Pre June 30th (I am not saying which year) first flight. Personally I am still thinking its going to slip still into Q3 (or is that actually Q8 ;-)

An interesting aside here is to consider the dynamics of the order books in Japan. Airbus has been pinning a lot on ANA being the Japanese customer for the A380. As they operating experience with an Airbus type. With JAL's commercials now a lot more stable - this may create on opportunity for Super Salesman John to persuade JAL to take the Airbus jumbo. We shall see.

This morning the US Airline Quality Index (AQI) for 2008 was published.

http://www.aqr.aero/index.htm

There is good news in that the ratings actually went up. Almost universally this has been attributed to the reduction in traffic. If nothing else this shows that it is both possible to improve and also that the incremental travellers need to be better serviced. Hmmm does that indicate that the airlines have too many staff/resources for the amount of current passengers or not enough for the peaks. THAT is an interesting question. But I digress.

If we look at the carriers in the list apart from Northwest (who astonishingly has come in at 4th position) Continental of the legacy network carriers is highest at 7th. The lowest positions are occupied by the Airlines and their feeder ACMI carriers. Delta being one of the worst off here.

So apart from the people who live in Detroit and Minneapolis who must either be expecting bailout money or someone has put something in the water ;-) , it shows that the smaller carriers do better on their own and provide a better service.

05 April 2009

Aer Lingus, one of the poster children of the Hybrid Value Carriers has lost its CEO, former Emirates executive, Dermot Mannion.

A formal announcement will be made this morning to the Irish stock exchange where EI's shares are traded.

Michael O'leary must be rubbing his hands with glee. And perhaps not just a little bit of relief. Twice his Euro 1.40 offer has been rejected. On Friday EI's shares closed at less than half that value 67 cents.

A short three years plus of Mannion's reign has come to an abrupt end. With a projected loss of near 120 million euros forecast for 2009 - nearly double Mannion's original estimate of 55 millions, things are starting to look pretty dire for the former Irish Flag Carrier.

The global economic gloom is being especially hard on marginal airlines such as EI. Surprisingly the two characteristic carriers of the Legacy Carrier moving down Air Canada and Aer Lingus have both lost their leaders in the space of a few weeks.

while the timing may be coincidental the pressures on the executive suite at any airline is getting pretty intense.